Evaluating the 'Past Performance' of Federal Contractors ...

1 Evaluating the past performance of Federal Contractors : Legal Requirements and Issues Kate M. Manuel Legislative Attorney February 5, 2015. Congressional Research Service 7-5700. R41562. CRS Report for Congress Prepared for Members and Committees of Congress Evaluating the past performance of Federal Contractors Summary Poor performance under a Federal contract can have immediate consequences for Contractors , who could be denied award or incentive fees, required to pay damages, or terminated for default. In addition, it could affect their ability to obtain future contracts because Federal law generally requires agencies to evaluate Contractors ' past performance and consider past performance information when making source selection decisions in negotiated procurements and determining whether prospective Contractors are responsible. past performance refers to performance on active and physically completed contracts and certain orders under existing contracts.

2 Federal law generally requires agencies to evaluate and document contractor performance on contracts or orders whose value exceeds the simplified acquisition threshold (generally $150,000). The evaluation must generally address the quality of the product or service supplied by the contractor , its efforts to control costs, its timeliness and compliance with schedules, its conduct of management or business relations, its performance in subcontracting with small businesses, and other applicable factors ( , tax delinquency). The evaluation and any contractor response comprise the past performance information that is stored in government databases ( , past performance Information Retrieval System (PPIRS), Federal Awardee performance and Integrity Information System (FAPIIS)) and may be used in future source selection decisions. Federal law also generally requires agencies to consider Contractors ' past performance when making source selection decisions in negotiated procurements whose value exceeds the simplified acquisition threshold.

3 In a negotiated procurement, the contract is awarded to the offeror whose proposal represents the best value for the government based on various factors identified in the solicitation. These factors typically must include price and past performance . However, other factors may be considered, and procuring agencies determine the weight given to various factors. Additionally, agencies are required by law to consider whether the contractor has a satisfactory performance record when determining whether the contractor is sufficiently responsible to be awarded a Federal contract. Agencies generally cannot award a contract without determining that the contractor is responsible. While agencies are generally prohibited from repeatedly finding a contractor nonresponsible based upon the same deficient past performance , they may debar or suspend Contractors for willful failure to perform under a contract or contracts, or for a history of failure to perform or of unsatisfactory performance of a contract or contracts.

4 Reports alleging that Contractors received new contracts or orders despite poor performance under prior ones have recently prompted interest in the role that evaluations of past performance play in contracting, as well as attempts by some Members of Congress and the Obama Administration to strengthen requirements pertaining to performance evaluations. The 112th Congress enacted legislation that requires the Department of Defense ( 112-81) and the Federal Acquisition Regulatory Council ( 112-239) to develop strateg[ies] for ensuring that past performance reports are timely, accurate and complete; and give Contractors 14 days to comment on, rebut, or supplement past performance reports. The 113th Congress also enacted legislation addressing certain issues relating to past performance ( 113-6, 113-291), although this legislation was narrower in scope than that enacted by the 112th Congress. In addition, the Obama Administration updated the Federal Acquisition Regulation (FAR) in 2013 to standardize the factors used in Evaluating Contractors ' performance , and require that all past performance information be entered into the contractor performance Assessment Reporting System (CPARS).

5 It made further updates to the FAR in 2014 to implement 112-81 and 112-239. Congressional Research Service Evaluating the past performance of Federal Contractors Contents Evaluating and Documenting performance .. 2. Contents of Evaluations .. 3. Procedures for Compiling, Posting, and Using 4. contractor Challenges to performance Evaluations .. 6. Consideration of past performance in Source Selection in Negotiated Procurements .. 9. past performance as an Evaluation Factor .. 11. Protesting Agency Evaluations of past 15. Other Consideration of past performance in Source Selection .. 16. past performance as a Criterion in Responsibility Determinations .. 17. Satisfactory performance Record As Condition for Contract .. 18. Protests of Responsibility/Nonresponsibility Determinations .. 19. De Facto Debarment .. 20. Debarment and Suspension Under the FAR .. 21. Tables Table 1. Various Exchanges Potentially Involving past performance Information.

6 14. Contacts Author Contact 22. Congressional Research Service Evaluating the past performance of Federal Contractors P oor performance under a Federal contract can have immediate consequences for Contractors , who could potentially be denied award or incentive fees, required to pay damages, or terminated for In addition, it can affect their ability to obtain future contracts because Federal law generally requires agencies to evaluate contractor 's past performance and consider past performance information when making source selection decisions in negotiated procurements and when determining whether prospective Contractors are responsible. past performance refers to Contractors ' performance on active and physically completed contracts and certain orders under existing Reports alleging that some Contractors received new contracts despite allegedly deficient performance under prior or current contracts have recently prompted interest in the role that evaluations of past performance play in Federal contracting,3 as well as attempts by some Members of Congress and the Obama Administration to improve agencies' compilation and use of past performance evaluations.

7 The 112th Congress enacted legislation that requires the Department of Defense (DOD) ( 112-81) and the Federal Acquisition Regulatory Council ( 112-239) to develop strateg[ies] for ensuring that past performance reports are timely, accurate and complete; and would give Contractors 14 days to comment on, rebut, or supplement past performance reports. The 113th Congress also enacted legislation addressing certain issues relating to past performance , although such legislation was narrower in scope than that enacted in the 112th In addition, the Obama Administration updated the Federal Acquisition Regulation (FAR) in 2013 to standardize the factors used in Evaluating Contractors ' performance , and require that all past performance information be entered into the contractor performance Assessment Reporting System (CPARS).5 It made further updates to the FAR in 2014 to implement 112-81 and Contractors , however, have expressed concern that increased emphasis on past performance information could lead to de facto debarment or blacklisting of 1.

8 See 48 (liquidated damages); 48 (award and incentive fees); 48. (termination for default). 2. 48 As used here, an order is a request for work under an existing contract. 3. For example, concerns about Contractors ' past performance factored significantly in discussions about the problematic roll-out of See generally archived CRS Report R43368, Contractors and : Answers to Frequently Asked Questions , by Kate M. Manuel, Brandon J. Murrill, and Rodney M. Perry. 4. See Consolidated and Further Continuing Appropriations Act, 2013, 113-6, 520(d), 127 Stat. 370 (March 26, 2013) (requiring the Department of Homeland Security Inspector General to include past performance problems in its review of agency contracts awarded using other than full and open competition ); Carl Levin and Howard P. Buck . McKeon National Defense Authorization Act for Fiscal Year 2015, 113-291, 821, Stat. (December 19, 2014). (making failure to comply with a subcontracting plan under the DOD Comprehensive Subcontracting Plan Test Program a factor in evaluations of past performance ), id.

9 At 824, Stat. (requiring that DOD regulations regarding reverse auctions provide for past performance information created by third parties conducting reverse auctions on the department's behalf be made available to offerors). 5. See Dep't of Defense, Gen. Servs. Admin., & Nat'l Aeronautics & Space Admin., Documenting contractor performance : Final Rule, 78 Fed. Reg. 46783 (August 1, 2013). 6. See also Dep't of Defense, Gen. Servs. Admin., & Nat'l Aeronautics & Space Admin., contractor Comment Period, past performance Evaluations,: Final Rule, 79 Fed. Reg. 31197 (May 30, 2014) (implementing changes made by 112-81 and 112-239). 7. See, , Tom Spoth, contractor performance Data to Become Public, Federal Times, August 6, 2010, available at ; Matthew Weigelt, New Law Puts contractor performance in Public Spotlight, Wash. Tech., August 5, 2010, available at Such Contractors worry that, as the weight given to past performance information increases, Contractors will be effectively excluded from future contract opportunities based upon information about them that they may not be aware of, or whose accuracy and ( ).

10 Congressional Research Service 1. Evaluating the past performance of Federal Contractors This report provides an overview of existing legal requirements pertaining to past performance , including the issues raised by Contractors ' attempts to challenge (1) agency evaluations of their past performance , (2) source selection decisions based, in part, on consideration of past performance information, and (3) responsibility determinations. Evaluating and Documenting performance While agencies have long informally evaluated Contractors ' performance and generally kept some records regarding this performance , at least during the term of the contract, they were not required to compile evaluations of past performance until 1993. Then, as part of reforms requiring agency consideration of past performance in certain source selection decisions, discussed below, the Office of Federal Procurement Policy (OFPP) directed Federal agencies to [p]repare evaluations of Contractors ' performance on all new contracts over $100,000.